With subsidies protected, hospital leaders see brighter future

Hospital leaders expressed relief and delight Thursday after the U.S. Supreme Court solidified the future of subsidized insurance for low- and middle-income Americans in all 50 states under the Affordable Care Act.

The 6-3 ruling in King v. Burwell means that insurance will remain affordable for 6.4 million Americans in 34 states and that hospitals will have a payment source for many previously uninsured patients, though Republicans continue to call for repealing the ACA.

“We're just celebrating here today,” said Dr. Richard Gilfillan, CEO of Trinity Health in Livonia, Mich. “In our board meeting, there was just a yahoo, spontaneous shout and glee and then applause.”

Trinity estimates that in the states where it operates, 3.8 million people were at risk of losing coverage. “The No. 1 impact for us is that those people who want to get care can continue getting care,” added Gilfillan, who formerly headed the CMS Innovation Center, which was created by the healthcare reform law.

“It's very positive for the industry,” said Alan Miller, CEO of Universal Health Services, a publicly traded chain with acute-care and behavioral health hospitals in 37 states. “It's good for reduction in bad debt. We'll get paid for our services.”

At health systems across the country, executives emphasized that the ruling will allow them to continue to focus on reforming healthcare delivery, with a focus on providing people with urgent and preventive care before they end up in the emergency room or the hospital.

“It's critically important to population health,” said Bill Carpenter, CEO of publicly traded LifePoint in Brentwood, Tenn. Most of its 64 hospitals are small, rural facilities. “We are grateful that those people who bought affordable health insurance through exchanges will continue to have coverage.”

Healthcare investors also cheered the ruling, sending shares of companies such as Community Health Systems and Tenet Healthcare Corp. as much as 14% higher.

The area of southwestern Florida had the second-highest uninsured rate in a state that itself had the second-highest number of people without health insurance. Many people who were employed in service jobs lost their job-based coverage when the economy tanked several years ago. At Lee Memorial Health System in Fort Myers, the share of patients with private insurance had dropped from 35% to 20%.

Under Obamacare, 1.3 million people purchased coverage through Florida's federal exchange, with the large majority receiving premium subsidies. Because of the ACA's coverage expansion last year, “we saw a leveling off in the decline in commercial insurance,” said Lee Memorial CEO Jim Nathan. “That's a positive for us and we were about ready to lose that.”

For 26-hospital UnityPoint Health, the King ruling protects the premium subsidies for most of the 430,000 people in its three states—Illinois, Iowa and Wisconsin—who bought insurance through the federal exchanges serving those states. “With their coverage intact, these residents will continue to have access to a full range of healthcare services,” CEO Bill Leaver said in a written statement. “They will not be forced to seek treatment in hospital emergency rooms, the most expensive route to care.”

At Texas Health Resources—located in a state where 1 million people receive subsidies—CEO Barclay Berdan also emphasized that the decision will protect access to preventive and early intervention services. “It's also good news for every other insured Texan because the larger pool of insured people helps control the costs of rising premiums,” he said in a written statement.

Notably, the justices not only upheld the Obama administration's interpretation that the ACA unambiguously authorizes premium subsidies in all the states, but they shut the door for future administrations to interpret the law differently and shut off subsidies in states served by the federal marketplace.

The decision is likely to close the door on future legal challenges to the healthcare reform law and take the healthcare pressure off the 2016 elections, said Fletcher Lance, national healthcare practice leader for global consulting firm North Highland based in Nashville, who has worked with hospital companies on planning for various scenarios ahead of the ruling. For Republicans who want to repeal or roll back the healthcare reform law, “it becomes politically riskier to do that now,” he said. “The die is clearly cast.”

Beyond that, Lance said, more states may move to expand Medicaid to low-income adults under the ACA. In addition, more uninsured people are likely to sign up for exchange coverage now that the Supreme Court has removed uncertainty about the legality of the subsidies. That explains the quick rise in stock prices, Lance said. Investors are anticipating more paying customers for hospitals and insurers, he added.

In Ohio, where 234,000 people bought health insurance through the federal exchange and 196,000 of them got a subsidy, providers were relieved. “The court's ruling allows for stability,” said Dr. Bruce Vanderhoff, chief medical officer of OhioHealth. “A negative ruling would have been very disruptive. It would have been a lot like pulling a thread in a garment. You just don't know what will happen if you pull that thread.”